Session 1 (Adema) - OECD Social Expenditure

8/13/2019 Session 1 (Adema) - OECD Social Expenditure

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Willem AdemaSenior Economist, Social Policy Division, OECD

Social Spending in the OECD:

Concepts, indicators and trends

Workshop on Measuring Social Protection

Statistics Indonesia - Badan Pusat Statistik,

Jakarta, 14 - 16 May 2013


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This presentation covers:

1. Background to the OECD Social Expendituredatabase (SOCX)

2.Trends in social expenditure

3. Social spending after tax

4. Re-distribution

5. The ageing challenge


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The OECD Social Expenditure database (SOCX)

SOCX was developed in the 1990s to monitor trends in social

spending and analyse changes in its composition in line with the

SNA

cross-nationally comparable statistics on public and private social spending at the detailed

programme level to facilitate reclassification where required.

Data on the effect of fiscal measures is often of a more aggregate nature.

SOCX covers 34 OECD countries with data from 1980: shorter

time-series for countries which have joined since the mid-1990s.

Sources: national correspondents and ESTAT for EU countries andother OECD databases: OECD Health data; OECD Database on

Labour Market Programmes; the OECD Education database; and

a Questionnaire on fiscal measures via the OECD Centre for Tax

Policy and Administration


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What is social expenditure?

The provision by public and private institutions of benefits to and

contributions targeted at households and individuals during circumstances

which adversely affect their welfare, provided that the provisions of the

benefits and financial contributions constitutes neither a direct payment

for a particular good or service nor an individual contract or transfer.

Social spending involves redistribution and/or compulsion:

Public : financial flows controlled by General Government (central + local

governments + social security funds)

Private

mandatory: stipulated by legislation (i.e. employer provided sickness

benefits)

voluntary: stipulated by collective agreement (i.e. occupational

pensions funds, private health)


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Categorisation of benefits with a social purpose

Public Private

Mandatory Voluntary Mandatory Voluntary

Redistribution

across households

Means-tested

benefits, social

insurance benefits

Voluntary participation

in public insurance

programmes. Self-employed opting in

to obtain insurance

coverage.

Employer-provided

sickness benefits,

benefits accruing frommandatory contributions,

to, for example, pension

or disability insurance.

Tax-advantaged benefits,

e.g.,individual retirement

accounts, occupationalpensions, employer-

provided health plans

No redistribution

across households

Benefits from

governmentmanaged

individual saving

schemes

Non tax-advantaged

actuarially fair pensionbenefits

Exclusively private:

Benefits accruing frominsurance plans bought at

market prices given

individual preferences.

The shaded cells reflect benefits that are NOT classified as social.


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OECD Social Expenditure database SOCX -

structure

1. Old Age

2. Survivors

3. Incapacity-related benefits

4. Health 5. Family

6. Active labour market programmes

7. Unemployment

8. Housing

9. Other social policy areas

5

45


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Trends in public social protection

Pub lic s oc ial spend ing , in percen tage o f GDP, 1960-2009

Source: OECD Social Expenditure database (SOCX, www.oecd.org/els/social/expenditure).
http://www.oecd.org/els/social/expenditurehttp://www.oecd.org/els/social/expenditure


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Social spending and the crisis

Annu al growth in real publ ic soc ial spending and real GDP,

Index 2007= 100 (left sc ale and pu blic soc ial spen din g as a % GDP (right scale), 2007-2012


Australia France

Greece United States

5

10

15

20

25

30

35

70

80

90

100

110

120

130

140

150

2007 2008 2009 2010 2011 2012

%

5

10

15

20

25

30

35

70

80

90

100

110

120

130

140

150

2007 2008 2009 2010 2011 2012

%

5

10

15

20

25

30

35

70

80

90

100

110

120

130

140

150

2007 2008 2009 2010 2011 2012

%

5

10

15

20

25

30

35

70

80

90

100

110

120

130

140

150

2007 2008 2009 2010 2011 2012

%
http://www.oecd.org/els/social/expenditurehttp://www.oecd.org/els/social/expenditurehttp://www.oecd.org/els/social/expenditure


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Public spending on family benefits and labour

market programmes went up during the crisis

1.Due to reform in 2007/8, public spending on home-help services decreased in the Netherlands.

2. Available indicators underestimate the extent of public spending on childcare for Federal countries (e.g.

the United States), as relevant spending by local governments is not fully reported to Federal authorities.

United Kingdom

France

Sweden

GermanyAustralia

OECD

Netherlands1

Japan

Greece

United States2

Korea

3.6

3.7

3.4

2.72.5

2.3

2.8

1.3

1.1

1.2

0.7

0.6

0.3

0.4

0.30.3

0.3

0.2

0.3

0.0

0.3

-0.3

-1 0 1 2 3 4

Public spen ding on family benefits in percentage of GDP, 2007

Increase 2007-2009

0.5

2.3

1.8

2.10.7

1.2

2.2

0.5

0.6

0.4

0.4

0.3

0.2

0.1

0.60.2

0.5

0.4

0.7

0.3

0.7

0.6

0 1 2 3 4

Public spen ding on labour market programmes in p ercentage of GDP, 2007

Increase 2007-2009



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Health and Pension spending are key social

policy areas in the OECD

Public soc ial expenditure by bro ad social pol icy area, % GDP, in 2009



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Private social protection

Composit ion of p rivate social expenditure by c ategory, % GDP, 2009



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Tax systems and social spending

Gross and net social expenditure

Gross social expenditure

Direct taxes and social contributions

Indirect taxes on consumption (VAT)

+ Tax break for social purposes (TBSP)

= Net social expenditure


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Taxing benefits and associated consumption

Direct and in direct taxes paid by recipients o f publ ic/private benefi ts, % GDP, in 2009

A. Direct taxes paid by recipients of benefits

B. Indirect taxes paid by recipients of benefits



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Tax breaks with a social purpose

Revenue foregon e of Tax breaks with a social purpo se (excludin g TBSPs to p ensions), % GDP, 2009



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Similarity in spending totals

In many OECD countries net total social spending is around 20-25% of GDP

Gros s to n et soc ial expend iture, % GDP, 2009



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The redistributive nature of tax and (cash)

transfer systems varies across the OECD

Source: Calculations from OECD Income Distribution Database (www.oecd.org/social/income-

distribution-database.htm).

A. Average

ratio of

househlod

disposable

B. Share of

public

transfers paid

to lowest

C. Transfers

to lowest

quintile

(A*B/100)

D. Average

ratio of

househlod

disposable

E. Share of

taxes paid by

lowest quintile

F. Taxes from

lowest quintile

(D*E/100)

Gini

coefficient at

disposable

income

Around 2000s

Australia 12.0 42.7 5.1 18.1 0.4 0.1 0.334 29% 33%

France 30.1 17.1 5.1 15.1 2.3 0.4 0.303 40% 41%

Germany 26.7 22.0 5.9 35.8 2.6 0.9 0.286 42% 44%Greece 32.2 11.2 3.6 31.0 5.6 1.7 0.337 35% ..

Japan 23.6 13.9 3.3 22.4 5.1 1.1 0.336 31% 22%

Korea 5.0 24.3 1.2 8.9 5.6 0.5 0.310 9% ..

Netherlands 19.4 29.4 5.7 45.5 5.6 2.5 0.288 32% 31%

Sweden 27.3 27.0 7.4 32.2 5.4 1.7 0.269 39% 46%

United Kingdom 19.4 25.3 4.9 25.6 2.5 0.6 0.341 35% 31%

United States 12.6 21.9 2.8 24.8 1.3 0.3 0.380 24% 25%

OECD-31 23.6 21.7 4.7 26.8 4.3 1.2 0.306 35% ..OECD-18 .. .. .. .. .. .. .. 35% 33%

Gross public transfers

paid to househlods

Direct taxes and asocial security

contributions

Redistributive effect

Percentage difference through

transfers and taxes between

Gini at market income and

disposable income

Around 2010s
http://www.oecd.org/social/income-distribution-database.htm)http://www.oecd.org/social/income-distribution-database.htm)http://www.oecd.org/social/income-distribution-database.htm)http://www.oecd.org/social/income-distribution-database.htm)http://www.oecd.org/social/income-distribution-database.htm)http://www.oecd.org/social/income-distribution-database.htm)http://www.oecd.org/social/income-distribution-database.htm)http://www.oecd.org/social/income-distribution-database.htm)


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Populations are ageing and the old-agesupport ratio will halve in the OECD

Source: OECD (2011), Pensions at a Glance, OECD Publishing, Paris

(www.oecd.org/els/social/pensions/PAG ); United Nations, World Population Prospects - 2008 Revision.
http://www.oecd.org/els/social/pensions/PAGhttp://www.oecd.org/els/social/pensions/PAG


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Thank you and further information

The OECD SOCX database is accessible viawww.oecd.org/els/social/expenditure

November 2012:Social spending during the crisis: Social

expenditure (SOCX) data update 2012.

OECD Social, Employment and Migration Working Papers, No. 124:

Is the European Welfare State Really More Expensive? Indicators

on Social Spending, 1980-2012; and a Manual to the OECD Social

Expenditure Database (SOCX).

http://www.oecd.org/els/listofsocialemploymentandmigrationwor

kingpapers.htm

To come the OECD SOCR Recipiency database
http://www.oecd.org/els/social/expenditurehttp://www.oecd.org/els/soc/OECD2012SocialSpendingDuringTheCrisis8pages.pdfhttp://www.oecd.org/els/soc/OECD2012SocialSpendingDuringTheCrisis8pages.pdfhttp://www.oecd.org/els/listofsocialemploymentandmigrationworkingpapers.htmhttp://www.oecd.org/els/listofsocialemploymentandmigrationworkingpapers.htmhttp://www.oecd.org/els/listofsocialemploymentandmigrationworkingpapers.htmhttp://www.oecd.org/els/listofsocialemploymentandmigrationworkingpapers.htmhttp://www.oecd.org/els/soc/OECD2012SocialSpendingDuringTheCrisis8pages.pdfhttp://www.oecd.org/els/soc/OECD2012SocialSpendingDuringTheCrisis8pages.pdfhttp://www.oecd.org/els/social/expenditure

Session 1 (Adema) - OECD Social Expenditure

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